The proposed research involves an economic analysis of the impact of both the federal and the state-local tax systems on the elderly. Three major questions will be addressed: 1) What is the burden of the U.S. tax system on the elderly? Are certain groups of elderly facing excessive tax burdens? 2) In what ways have the elderly been affected by recent changes in the structure of the state-local tax system, such as voter mandated tax limitations, and the increasing importance of sales taxes relative to property taxes? 3) What has been the impact of public policies such as elderly income tax exemptions and "circuit breaker" property tax relief programs on the elderly? Are additional policy changes desirable to promote a more equitable tax treatment of the elderly? To study the complete U.S. tax system, we construct a microsimulation model, which is an elaborate modeling device that mimics in great detail the workings of the tax system. The model allows us to allocate all major taxes to individual households. In previous work we have developed such a model for the tax system in California. The model includes a detailed module for the California property tzx system, and separate state and federal income tax modules. In the first stage of this project, the model will be used to simulate the burden of all major federal, state and local taxes on California's elderly population. We will also use the model to evaluate the impact on the elderly of California's Proposition 13, and of several expected changes in the tax system. In the second stage of this project, the modeling effort will be extended to several additional states. In this way the model will be used to provide a representative national picture of taxation of the elderly. The model will also allow us to evaluate the impact of existing tax relief provisions for the elderly, and to analyze the impact of potential changes in U.S. tax policy.